IS GOVERNMENT LIABLE TO PAY GST?

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IS GOVERNMENT LIABLE TO PAY GST?

IS GOVERNMENT LIABLE TO PAY GST?

There are various services provided by Central Government (CG), State Government (SG), Union Territory or Local Authority (Herein after referred as Government). On these services provided by Government is GST to be paid? If GST is to be paid who is liable to pay it?

Various services provided by Government of India are exempt as per the notification of exemption issue by Government.

Let’s have a look at these services that are exempt under GST law:

  1. As per Sr. No. 6 of exemption notification All the Services by the Government are exempt excluding the following:
  2. Services by the Department of Post by way of
  • Speed Post
  • Express Parcel Post
  • Life Insurance
  • Agency Services

Given these are provided to person other than Government.

  1. Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport.
  2. Transport of goods or passengers or
  3. Any service other than the services covered under entries above, provided to any business entity.
  4. Services by a CG, SG, Union Territory, Local Authority or Governmental Authority by way of any activity in relation to any function entrusted to a Panchayat.
  5. Services provided by CG, SG, Union Territory or Local Authority to a business entity with an aggregate turnover of upto twenty lakh rupees (ten lakh rupees in special category state) in preceding F.Y.
  6. Note that: This exception is not applicable if the services are the services mentioned in (a) to (c) in Point 1. The exception is also not applicable in case the Service is Renting of Immovable property
  7. Services provided by CG, SG, Union Territory or a local authority where the consideration for such services does not exceed Five thousand Rupees. This exception is not applicable if the services are the services mentioned in (a) to (c) in Point 1.In case of continuous service the limit is Rs. 5000 per Financial Year.
  8. Services provided by CG, SG, Union territory, or local authority by way of registration or certification as prescribed.
  9. Services provided by CG, SG, Union territory, or local authority by way of issuance of passport, Visa, driving license, birth certificate or death certificate.
  10. Services provided by CG, SG, Union territory, or local authority by way of allowing a business entity to operate as a telecom service provider or use radio frequency spectrum prior to April 2016.
  11. Services provided by CG, SG, Union territory, or local authority by way of assignment of right to use natural resources to an individual farmer for agricultural activities.
  12. Services provided by CG, SG, Union territory, or local authority by way of assignment of right to use any natural resources where such right to use any natural resource was assigned before 1st April 2016.
  13. Services provided by Govt. entity to CG, SG, Union Territory, Local Authority or any person specified by CG, SG, Union territory or Local Authority against consideration received from CG, SG, Union territory or Local Authority.
  14. Services provided by CG, SG, Union territory, or Local Authority to another CG, SG, Union territory or Local Authority.
  15. Services provided by CG, SG, and Union territory by way of Merchant Overtime charges on Import / Export.
  16. Services provided by the CG, SG, Union territory or Local Authority by way of tolerating non-performance of a contract for which consideration in the form of fines or liquidated damages are payable

Although the first entry is talking that all the services are exempt but there is a big list of exemption. What was the need for this extra exemption? The reason is that the first point does not apply on Business Entity.

It is clear that services supplied by Central Government, State Government, Union Territory or Local Authority are exempt in many cases. However, in the case the services are taxable who is liable to pay tax on it? Services provided by Government are notified under Reverse Charge Mechanism under section 9(3) of the Act if it is supplied to Business Entity in taxable territory.

In this case the burden to pay tax is on the Recipient of Service.

On all the services provided or agreed to be provided to Business Entity in taxable territory by Government or local authority shall be chargeable under reverse charge excluding the following Services:

(1) Renting of immovable property, and

(2) Services specified below-

  1. services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government;
  2. services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;
  3. transport of goods or passengers

After more amendment it was mentioned that the Reverse Charge Mechanism shall also be applicable to Service of Renting of immovable property provided by Government to ANY REGISTERED PERSON.

To conclude, the amount of GST shall be paid by Government in case of Service of by way of speed post, express parcel post, life insurance, and agency services, services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; and service of transport of goods or passengers. The reason being these services are given to masses and it is not possible to keep a check on all services. Also generally, the service of renting of immovable property is given to the unorganized sector that cannot be brought in purview of GST. In case the service is given to registered it is notified under RCM.


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